File No. 893.51/1807
[Untitled]
Peking, September 16, 1917, midnight.
Your September 13, 3 p.m. No advance for general purposes is now needed by China or could be made advantageously to its interests and those of the Allies unless so controlled as to assure its application to specific enterprises. What with cessation of German and Austrian indemnities and postponement of Allied indemnities, the Chinese Government will be in a more prosperous condition than for many years, even without the second reorganization loan now under negotiation with the Consortium as reported in my September 7, 5 p.m. Participation in that loan would have a value as affording counterpoise to the dominant influence of course [of Japan?] in the Consortium, which is exerted to curtail fiscal independence of China. Any independent loan could however be financially or politically justified by specific purposes to which it might be devoted. * * *
[Page 141]In considering any advances that may be made to the Chinese Government as at present constituted, it is impossible to ignore dangers of waste and of simple malversation. A fair share of control in such matters rests in the hands of persons who, in spite of the personal integrity of the Prime Minister, are unscrupulous and utterly indifferent to any considerations but their direct profit and the indirect advantage which they may anticipate from subservience to the particular interests of Japanese Consul [Government?]. Other elements of the Government may with equal confidence be expected to utilize every financial advantage to secure the position of the military clique as against the southern radicals. Adequate security and strict control of expenditures are the only safeguards against having our money played as a pawn against ourselves in international politics and against the parliamentary party in domestic politics. Under present conditions an unguarded general loan by us would be merely a means for compelling the northern party to play into the hands of Japan by resorting to her for supplies and for guidance, which in view of the platonic character of Japan’s participation in the war would seem scarcely worth the price, and would assuredly arouse the resentment of the south against the association of our country with pecuniary assistance which would enable the northern military party to buy up the support of its more prominent opponents and otherwise to fortify its position. On the other hand, financial assistance for a constructive national purpose would increase the existing good will. In view of these circumstances I beg earnestly to recommend that no funds be freely given to the present Government to dispose of, but that all sums which our Government may be disposed to make available should be, first, charged against definite revenues; second, restricted to definite war purposes and controlled so as to remove them from the possibility of manipulation for the purposes of strengthening the military party against the Republicans and of strengthening Japanese influence as against American and foreign interests. Nor(?), I venture to suggest, should any advances be made for the Government of America without some understanding which would definitely and unequivocally commit the Chinese Government to the [assurance?] that it should make no undertakings or commitments inconsistent with its own political and territorial integrity or with the absolutely equal opportunity of Americans within that territory in economic and commercial enterprises. Also I venture to suggest that it would be salutary and advantageous to all concerned to insist that all obligations incurred by the Chinese Government should be communicated to all the Allies and made public at the request of any one of them within a specified period of say one month after conclusion.